Activision Blizzard’s strategy for world conquest

Activision Blizzard has become the No. 2 publicly traded game company in the world, second only to China’s Tencent. It has done so by being singularly committed to making the world’s biggest video game franchises and putting everything behind them. That’s the company’s continuing strategy to dominate gaming and the larger entertainment industry, and it communicated the full depth of that strategy at its investor day today ahead of the BlizzCon event in Anaheim, California.

Activision has occasionally diverged from that strategy over 35 years, but it has always come back to it. When current CEO Bobby Kotick took over an ailing Activision in 1991, the company had become known as “lack of vision,” Kotick recalled in a video. They had so little money that they had to make every game a hit. They still had passion. One of their earliest efforts, Return to Zork (a visual retelling of the classic Zork text adventure), was a “wild success” and it gave the company the capital to start making new games. That started the company’s focus on a “franchise strategy.”

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“All we could do was make a small number of games, and they couldn’t be failures,” said Kotick.

Fast-forward to today, and Activision Blizzard has franchises that include Call of Duty, Destiny, Skylanders, Guitar Hero, Transformers, Warcraft, StarCraft, Diablo, Hearthstone, and now Candy Crush Saga, which comes via its $5.9 billion pending acquisition of King. With the addition of King, the company will serve more than 500 million players in 196 countries (compared to 70 million before the deal). Kotick noted that the company would serve as many countries as the Coca-Cola company (he serves on the Coke maker’s board).

“Inspiration and creativity focused on the right priorities,” Kotick said onstage at the company’s investor day at the BlizzCon event in Anaheim, California. “This is why our games are so important to the lives of hundreds of millions of people. We are expanding our capabilities across platforms, genres, audience demographics, and geographies — but always in the service of our players.”

Kotick said the focus will continue to be on providing the best games. He said the company is delving deeper into esports with the creation of a new division focused on it, and it is also creating a movie studio to develop films and TV shows, created internally to take advantage of the company’s franchises.

“As we launch our franchises in these broad, big, mass appeal ways, you’ll see opportunities for other forms of engagement like consumer products,” Kotick said.

Traditional video games are a mature industry, of course. Thomas Tippl, the chief operating officer at Activision Blizzard, said onstage that in the last decade, eight of the top ten titles come from well-known franchises every year in the core console and PC game business. From 2012 to 2015, only three new franchises broke into the top 10, including Activision Blizzard’s Destiny. The average life of a top-ten franchise is more than 10 years.

“We’re now also seeing the mobile space mature in this regard, which is why we think now is the right time to invest in King,” Tippl said.

In 2012, when Candy Crush Saga debuted, the average age of the top 10 games on the mobile charts was a year. Five new franchise broke into the top 10 in 2012. In 2015, the average age is three years, and King is expected to have three of the top 10 titles.

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Activision Blizzard’s digital business grew 22 percent this year. Its priorities include deepening engagement with franchises, and build enduring and beloved franchises with large, engaged social communities with whom the company has a direct connection, Tippl said.

Onstage, Zacconi said King has 1,600 employees with 12 studios. That started from nothing in 2003, and it was just 665 two years ago.

“This is the best team we could have joined in 2015,” Zacconi said. “Our vision is to serve everyone’s gaming kingdom” across all platforms. King delivers bite-sized experiences anytime, anywhere, Zacconi said.

King’s franchises include Candy Crush, as well as lesser-known titles Bubble Witch, Farm Heroes, and Pet Rescue. The company has three top 15 hits for the past seven quarters in mobile. Next, under the combined business, King will take advantage of Activision Blizzard’s franchises in the mobile market. And it is creating its own mid-core titles, or those that are hardcore in nature but played for short times, thanks to its own acquisition of Z2Live, for launch in 2016.

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“The reason I feel confident we can deliver on this plan is that we have built the team for it over the last 18 months,” he said.